Incentives

The honchos in the profession (Paul Krugman excepted) said everything was fine. Agreeing with the honchos will never get you in trouble. You will never lose your job or even miss a promotion because you made the same mistake as all the leading lights in the profession.

On the other hand, if you go against the honchos and end up being wrong, well you should be prepared to be sent to oblivion. You are obviously a raving lunatic who has no business being taken seriously as an economist. Even when you end being right against the honchos you can’t count on any great reward, since the honchos so control the profession and the media that “nobody could have seen” will be repeated at least frequently as the fact that some people did see.

Anyhow, what would an economist expect to happen in a situation in which option one carries no risks and reasonable expected rewards and option two carries enormous risks and only moderately higher expected rewards? In short, the incentives in the economics profession, just as in finance, strongly encourage a lack of original thinking.

In some ways I think this is a little misleading since most economists just don’t do any public commentary on issues of interest at all. But I think it’s important to look at political punditry in this light. Being a pure monger of the conventional wisdom is a bad idea since you’ll never get attention. But bucking the CW is problematic — if you dissent from the pack and are vindicated, you get no reward; if you follow the pack and get things wrong, you get no punishment; but if you break with the pack and you’re wrong, you at least risk being sent into oblivion. One trick is to come up with “contrarian” opinions that basically serve the interests or egos of the sort of people who are powerful in the media industry. The market for things about how the minimum wage is bad for poor people or affirmative action is bad for black people or teachers unions are bad for poor black people is always robust. Another popular gambit is proposing high-minded that you know perfectly well won’t happen. If there was some chance that agitating for an invasion of Myanmar might lead to an invasion of Myanmar, you’d have to think through the consequences. But since it won’t, just calling for it and maybe throwing something in where you call the U.N. “feckless” is a solid move.

Some of these kind of notions may even be correct on the merits. But it’s important to understand how little the merits of ideas have to do with the reward-structure embedded in voicing them. And, obviously, it would be naive to think that the blogging world doesn’t have its own parallel structure of incentives. But one of the strengths of the blogosphere’s emergence has been that its incentive logic is in tension with other incentive logics at play in the mediasphere, thus opening up some space for some different kinds of ideas and conversations.